Exxon Mobil’s (XOM) incredible reduction in shares outstanding, via aggressive stock buybacks, was the focus of a Wall Street Journal article today, a piece that wondered whether the oil giant mightn’t have short-changed itself by not investing more in oilfield exploration.
In all, the Journal notes, Exxon stock buybacks have totaled $207 billion over the past decade, including during periods when its stock was trading at high prices.
Exxon has enormous cash flow, and its capital expenditures have been large in recent years, though Chevron (CVX), its smaller competitor has been investing relatively larger amounts to find new oil reserves.
It’s impossible to say this early whether the Chevron investment binge is paying off, or whether Exxon’s more conservative approach is preferred. Return on invested capital is so skewed by oil prices in the current period.
Growth in reserves is important, of course, but the money invested to gain those reserves is crucial, too, and as oil companies drill deeper and into more complex situations, reserves are becoming more expensive – in unpredictable ways -- to build. Regardless, for long-term investors, both Exxon and Chevron have delivered stellar growth in dividend income; pay attention to that rather than current dividend yield.
From the editors of YCharts. We can be reached at email@example.com.
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